Risk Factors

Our business, operations and financial condition are subject to various risks and uncertainties. Holders of our common stock should carefully consider the following, as well as the more detailed discussion of risk factors and other information included herein:

Corporate Information

We were formed as a Delaware corporation in June 2005 under the name SkyTerra HNS Holdings, Inc. Our principal executive offices are located at 19 West 44 ^th Street, Suite 507, New York, New York 10036. Our telephone number is (212) 730-7540.

Our website is · . Information contained on our website is not incorporated by reference herein, and you should not consider information contained on our website as part of this document.

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RISK FACTORS

You should carefully consider the risks described below in addition to all other information provided to you in this document. Any of the following risks could materially and adversely affect our business, result of operations and financial condition.

Risks Related to the Business

The network communications industry is highly competitive. HNS may be unsuccessful in competing effectively against other terrestrial and satellite-based network providers, in both its Enterprise and Consumer businesses.

HNS operates in a highly competitive network communications industry in the sale and lease of both its products and its services. HNS’ industry is characterized by competitive pressures to provide enhanced functionality for the same or lower price with each new generation of technology at the time it negotiates contract renewals with customers. HNS’ results of operations reflect the need to increase its shipments and reduce its costs as unit prices decline on hardware products. HNS’ Enterprise business faces competition from providers of terrestrial-based networks (such as DSL, cable modem service and IP-based virtual private networks, or VPNs), which may have advantages over satellite networks for certain customer applications. Terrestrial-based networks are offered by telecommunications carriers and other large companies, many of which have substantially greater financial resources and greater name recognition than HNS does. The costs of a satellite network may exceed those of a terrestrial-based network, especially in areas that have experienced significant DSL and cable Internet build-out. It may become more difficult for HNS to compete with terrestrial providers as the number of these areas increase and the cost of their network and hardware services declines. HNS also competes for enterprise clients with other satellite network providers, satellite providers that are targeting the SME and SOHO markets, and smaller independent systems integrators on procurement projects. HNS’ ability to compete successfully in the VSAT enterprise market is primarily driven by its ability to retain its existing customers and to identify and target new customers requiring networks utilizing the advantages of satellite technology or the features of its VSAT products at the prices it offers. In Europe, HNS faces intense competition and does not expect such competition to abate in the near future. In Asia and Latin America, the build-out of terrestrial networks has adversely impacted demand for VSAT services and regulation and inequitable access remain barriers to new business.

HNS faces competition for its North American Consumer satellite Internet subscribers primarily from DSL and cable Internet service providers. Also, other satellite and wireless broadband companies have launched or are planning the launch of consumer satellite Internet access services that would compete with HNS in North America. Some of these competitors may offer consumer services and hardware at lower prices than HNS’. HNS anticipates increased competition with the entrance of these new competitors into its market and the increasing build-out and lowering cost of DSL and cable Internet access in North America. Terrestrial alternatives do not require HNS’ “external dish” which may limit customer acceptance of its products.

Failure to compete effectively within the network communications industry or failure to implement HNS’ business strategy while maintaining its existing business would result in a loss of revenue and a decline in profitability. Increased competition could result in fewer enterprise contracts or renewals or fewer enterprise or consumer subscribers, increased pricing pressure and loss of market share, any of which would harm HNS’ business and adversely affect its operating results. For a description of additional international competition risks, see “—HNS’ foreign operations expose it to risks and restrictions not present in its domestic operations” and “—HNS’ international sales and operations are subject to applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect its operations.”

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If HNS is unable to develop, introduce and market new products, applications and services on a cost effective and timely basis, or if HNS is unable to sell its new products and services to existing and new customers, HNS’ business could be adversely affected.

The network communications market is characterized by rapid technological changes, frequent new product introductions and evolving industry standards. If HNS fails to develop new technology and keep pace with significant industry technological changes, HNS’ existing products and technology could be rendered obsolete. Products in HNS’ industry are generally characterized by short life cycles because of technological innovation, such as increasing data rates, and declining prices. To remain competitive in the network communications market, HNS must be able to apply financial and technical resources to develop and introduce new products, applications and services, as well as enhancements to its existing products, applications and services. Even if HNS keeps up with technological innovation, it may not meet the demands of the network communications market. For example, HNS’ large enterprise customers may only choose to renew services with it at substantially lower prices or for a decreased level of service. Many of HNS’ large enterprise customers have existing networks available to them and may opt to find alternatives to its VSAT services or may renew with HNS solely as a backup network. If HNS is unable to respond to technological advances on a cost-effective and timely basis, or if its products or applications are not accepted by the market, then HNS’ business, financial condition and results of operations would be adversely affected.

The need to introduce and upgrade products requires large expenditures on engineering, research and development. As a stand-alone entity, HNS may not be able to devote the same amount of resources to this development effort compared to prior periods when it was a part of DIRECTV. This may make it more difficult to make the technological advances in its products necessary to compete against rival products and technologies.

Continued negative trends and factors affecting the telecommunications industry specifically and the economy in general may result in reduced demand and pricing pressure on HNS’ products and services.

Negative trends and factors affecting the telecommunications industry specifically and the economy in general over the past several years have negatively affected HNS’ results of operations. The telecommunications sector has been facing significant challenges resulting from excess capacity, new technologies and intense price competition. As a result of the build-out of capacity by telecommunications companies in the late 1990s, currently there is excess network capacity. This capacity, combined with the failure of many competitors in the telecommunications sector, has contributed to price reductions by terrestrial and satellite network competitors in response to soft market conditions. In addition, weak economic conditions in the last recession resulted in reduced capital expenditures, reluctance to commit to long-term capital outlays and longer sales processes for network procurements by HNS’ customers. These factors have not abated in the recovery. Finally, an overall trend toward industry consolidation and rationalization among HNS’ customers, competitors and suppliers can affect its business, especially if any of the sectors HNS services or the countries or regions that HNS does business in are affected. Any future weakness in the economy or the telecommunications industry could affect HNS through reduced demand for, and pricing pressure on, its products and services, leading to a reduction in revenues and a material adverse effect on HNS’ business and results of operations.

Satellite failures or degradations in satellite performance could affect HNS’ business, financial condition and results of operations.

HNS leases satellite transponder capacity from fixed satellite service, or FSS, providers in order to send and receive data communications to and from its VSAT networks. Satellites are subject to in-orbit risks including malfunctions, commonly referred to as anomalies, and collisions with meteoroids, decommissioned spacecraft or other space debris. In recent years, there have been several publicized satellite anomalies occurring in the global FSS fleet. Anomalies occur as a result of various factors, such as satellite manufacturing errors, problems with the power systems or control systems of the satellites and general failures resulting from operating satellites in the harsh space environment. There can be no assurances that the satellites HNS uses will not experience anomalies, nor that HNS will be able to obtain backup satellite capacity sufficient for its business purposes.

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Any single anomaly or series of anomalies affecting the satellites on which HNS leases transponder capacity could materially adversely affect its operations and revenues and its relationships with current customers, as well as HNS’ ability to attract new customers for its satellite services. Anomalies may also reduce the expected useful life of a satellite, thereby creating additional expenses due to the need to provide replacement or backup capacity and potentially reducing revenues if service is interrupted on the satellites HNS utilizes. HNS may not be able to obtain backup capacity at similar prices, or at all. See “—The failure to adequately anticipate HNS’ need for satellite capacity or HNS’ inability to obtain satellite capacity could harm its results of operations.” In the event of a failure or loss of any of the satellites on which HNS leases capacity, HNS may relocate to another satellite subject to the availability of substitute equipment, and use it as a replacement for the failed or lost satellite. In the event of a satellite failure, HNS’ services may be unavailable for several days to several weeks while backup in-orbit satellites are repositioned and services are moved or while HNS repositions its customers’ antennas to alternative satellites. HNS experienced one of these situations in late 2004 with one satellite on which it leases transponder capacity for service in North America. More recently, in August 2005, a satellite on which HNS leases transponder capacity to service certain customers in Europe experienced an outage lasting approximately nine hours. HNS’ European service provider has tested the satellite’s functionality and it appears normal although further anomalies are possible. Any relocation to an alternative satellite will require prior regulatory approval, which may not be obtained, or obtained in a timely manner. In addition, the entities from which HNS leases transponder capacity could be severely affected by anomalies affecting their satellites, which could result in disruption to the services they provide to HNS.

Any failure on HNS’ part to perform its VSAT service contracts or provide satellite broadband access as a result of satellite failures would result in a loss of revenue despite continued obligations under HNS’ leasing arrangements, possible cancellation of HNS’ long-term contracts, inability to continue with its subscription based customers, expenses to reposition customer antennas to alternative satellites and damage to HNS’ reputation which could negatively affect its ability to retain existing customers or gain new business. The cancellation of long-term contracts due to service disruptions is an exception to the generally non-cancelable nature of HNS’ contracts and such cancellation would reduce HNS’ revenue backlog previously described in this document. Such results could be for a short period of time if alternative satellite transponder space was available or indefinitely if HNS was unable to replace lost transponder capacity. See “—The failure to adequately anticipate HNS’ need for satellite capacity or HNS’ inability to obtain satellite capacity could harm its results of operations.”

The failure to adequately anticipate HNS’ need for satellite capacity or HNS’ inability to obtain satellite capacity could harm its results of operations.

HNS has made substantial contractual commitments for satellite capacity based on its existing customer contracts and backlog as well as anticipated future business. If future demand does not meet its expectations, HNS will be committed to maintain excess satellite capacity for which it will have no or insufficient revenues to cover its costs, having a negative impact on its margins and results of operations. For example, in 2002, HNS took a one time charge of $7.0 million in connection with the renegotiation of a contract related to excess transponder capacity. HNS’ transponder leases are generally for three to five years and different leases cover satellites with coverage of different areas or other different features, so HNS cannot quickly or easily adjust its capacity payments to changes in demand. If HNS only purchases satellite capacity based on existing contracts and bookings, capacity for certain types of coverage in the future may be unavailable to it and HNS may not be able to satisfy certain needs of its customers, resulting in a loss of possible new business. At present, until launch and operation of additional satellites, there is limited availability of capacity on the Ku-band frequencies in North America. In addition, the FSS industry has seen consolidation in the past decade, and today the four main FSS providers and a number of smaller regional providers own and operate the current satellites that are available for HNS’ capacity needs. The failure of any of these FSS providers or a downturn in their industry as a whole could reduce or interrupt the capacity available to HNS. If HNS is not able to renew its capacity leases, if HNS’ needs for capacity increase prior to new capacity becoming available or if capacity is unavailable due to any problems of the FSS providers, HNS’ business and results of operation would suffer.

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HNS’ networks and those of its third party service providers may be vulnerable to security risks.

We expect the secure transmission of confidential information over public networks to continue to be a critical element of HNS’ operations. HNS’ networks and those of its third party service providers and its customers may be vulnerable to unauthorized access, computer viruses and other security problems. Persons who circumvent security measures could wrongfully use information on the network or cause interruptions or malfunctions in HNS’ operations, any of which could have a material adverse effect on HNS’ and our business, financial condition and operating results. HNS may be required to expend significant resources to protect against the threat of security breaches or to alleviate problems, including reputational harm and litigation, caused by any breaches. Although HNS intends to continue to implement industry-standard security measures, these measures may prove to be inadequate and result in system failures and delays that could lower NOC availability and have a material adverse effect on HNS’ business, financial condition and operating results.

HNS faces new risks associated with its SPACEWAY satellite.

HNS currently plans to launch its SPACEWAY satellite in late 2006 and introduce service in 2007. In addition to the competitive risks for the satellite network services mentioned above, if HNS is unable to successfully launch and implement its SPACEWAY satellite as a result of any of the following risks, it will be unable to realize the anticipated benefits from its SPACEWAY satellite and its financial condition and results of operations will be adversely affected:

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While HNS does not have any current plans to do so, depending on its business and the satellite data communications market, it is possible that HNS may in the future decide to own and operate additional satellites, whether by exercising its existing option to build an additional SPACEWAY satellite or by developing or acquiring other satellites. Any decision by HNS to pursue the development or acquisition of additional owned satellites would subject it to risks similar to those that have been illustrated here for its SPACEWAY satellite.

The separation from DIRECTV has required HNS to incur additional costs to operate as a stand-alone entity and we and HNS face risks associated with the separation and the HNS Acquisition.

HNS is no longer able to rely on DIRECTV’s financial support and its creditworthiness. DIRECTV often guaranteed HNS’ obligations to customers or provided backup letters of credit or other similar support, and the need to provide its own letters of credit will limit the availability of HNS’ revolving credit facility. Some customers may not allow the release of DIRECTV from these guarantee obligations or view the lack of continued DIRECTV financial support as a negative factor in deciding whether to choose HNS’ products over its competitors’ products. In addition, HNS has agreed to indemnify DIRECTV in the event that DIRECTV is required to make any payments under these guarantee or other credit support obligations. Any of these events could have a significant adverse effect on HNS’ financial condition and results of operations.

HNS has only recently had to begin providing for certain services, including its own tax advisory services, treasury/cash management operations, risk management, employee benefits and business insurance. Previously, these services were provided, at least in part, by DIRECTV. In addition, we and HNS must implement financial and disclosure control procedures and corporate governance practices that enable us to comply, on a stand alone basis, with the Sarbanes-Oxley Act of 2002 and related Securities and Exchange Commission, or the SEC, rules. For example, we and HNS will need to further develop accounting and financial capabilities, including the establishment of an internal audit function and development of documentation related to internal control policies and procedures. Failure to quickly establish the necessary controls and procedures would make it difficult to comply with SEC rules and regulations with respect to internal control and financial reporting. Further, the actual costs of providing these services could exceed our expectations, which could have an adverse effect on our and HNS’ respective financial conditions and results of operations.

HNS may face difficulties in obtaining regulatory approvals for its provision of telecommunications services, and HNS may face changes in regulation, each of which could adversely affect its operations.

The provision of telecommunications services is highly regulated. HNS is required to obtain approvals from national and local authorities in connection with most of the services that it provides. As a provider of communications services in the United States, HNS is subject to the regulatory authority of the United States, primarily the Federal Communications Commission, or the FCC. HNS is subject to the export control laws, sanctions and regulations of the United States with respect to the export of equipment and services. Certain aspects of its business are subject to state and local regulation. In addition, HNS is subject to regulation by the national communications authorities of other countries in which HNS, and under certain circumstances its value-added resellers, or VARs, provide service.

While the governmental authorizations for HNS’ current business generally have not been difficult to obtain in a timely manner, the need to obtain particular authorizations in the future may delay HNS’ provision of current and new services. Moreover, the imposition by a governmental entity of conditions on its authorizations, or the failure to obtain authorizations necessary to launch and operate satellites or provide satellite service, could have a material adverse effect on HNS’ ability to generate revenue and conduct its business as currently planned. Violations of laws or regulations may result in various sanctions including fines, loss of authorizations and the denial of applications for new authorizations or for the renewal of existing authorizations.

Future changes to the regulations under which HNS operates could make it difficult for HNS to obtain or maintain authorizations, increase its costs or make it easier or less expensive for its competitors to compete with HNS. See “Business—Government Regulations.”

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HNS’ international sales and operations are subject to applicable laws relating to trade, export controls and foreign corrupt practices, the violation of which could adversely affect its operations.

HNS must comply with all applicable export control laws and regulations of the United States and other countries. United States laws and regulations applicable to HNS include the Arms Export Control Act, the International Traffic in Arms Regulations, or ITAR, the Export Administration Regulations and the trade sanctions laws and regulations administered by the Office of Foreign Assets Control of the United States Department of the Treasury, or OFAC. The export of satellite hardware, services and technical information with military or dual-use applications to non-United States persons is regulated by the United States Department of State’s Directorate of Defense Trade Controls under ITAR. The United States Department of Commerce’s Bureau of Industry and Security also regulates most of HNS’ international activities under the Export Administration Regulations. In addition, HNS is subject to the Foreign Corrupt Practices Act, or FCPA, that, generally, bars bribes or unreasonable gifts to foreign governments or officials.

Following a June 2004 voluntary disclosure by DIRECTV and DTV Networks, DIRECTV and DTV Networks entered into a consent agreement, which applies to HNS, with the U.S. Department of State in January 2005 regarding alleged violations of the ITAR. This consent agreement addresses exports of equipment and technology related to the VSAT business primarily to China but also to several other countries. As part of this agreement, DIRECTV paid a $4.0 million fine and one of HNS’ subsidiaries was debarred from conducting certain international business. HNS is now eligible to seek reinstatement and intends to do so in the near future. Also as part of the same consent agreement, a civil penalty of $1.0 million was assessed against HNS, which it is required to use for enhancing compliance measures to avoid future infractions. This amount will be applied by HNS to its compliance program over a three-year period. As a result of the voluntary disclosure and consent agreement, HNS is currently unable to perform its obligations under certain contracts in China and Korea addressed by the consent agreement and, if ultimately unable to perform, HNS may be liable for certain damages of up to approximately $5.0 million as a result of its non-performance. With respect to one such contract, HNS received notice in November 2005 that one of its customers in China filed a demand for arbitration with the International Center for Dispute Resolution, a division of the American Arbitration Association. The January 2005 consent agreement supplemented another consent agreement of DIRECTV in March 2003, arising out of separate violations of ITAR. Further violations of laws or regulations may result in significant additional sanctions including fines, more onerous compliance requirements, more extensive debarments from export privileges or loss of authorizations needed to conduct aspects of HNS’ international business. A future violation of ITAR or the other regulations enumerated above could materially adversely affect HNS’ business, financial condition and results of operations.

HNS’ future success depends on its ability to retain its key employees.

HNS is dependent on the services of its senior management team to remain competitive in its industry. The loss of one or more members of its senior management team could have an adverse effect on HNS until qualified replacements are found. There can be no assurances that these individuals could quickly be replaced with persons of equal experience and capabilities. In addition, technological innovation depends, to a significant extent, on the work of technically skilled employees. Competition for executive, managerial and skilled personnel in HNS’ industry is intense. It is expected that HNS will face continued increases in compensation costs in order to attract and retain senior executives, managers and skilled employees, especially if the current job economy continues to improve. HNS may not be able to retain its existing senior management, fill new positions or vacancies created by expansion or turnover or attract or retain the management and personnel necessary to develop and market its products. HNS does not maintain key man life insurance on any of these individuals.

HNS’ lengthy sales cycles could harm its results of operations if these sales are delayed or do not occur.

The length of time between the date of initial contact with a potential customer and the execution of a contract with the potential customer may be up to two years, particularly for complex procurements of HNS’

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VSAT systems. During any given sales cycle, HNS may expend resources in advance of the expected revenue from these contracts, resulting in an adverse effect on its operating results if the sale does not occur and the opportunity cost of having foregone alternative business prospects.

Because HNS depends on being awarded large-scale contracts in competitive bidding processes, losing a modest number of bids could have a significant adverse effect on its operating results.

In 2004, approximately 63% of HNS’ sales revenue was derived from large-scale VSAT network contracts that were awarded to it following competitive bidding. These large-scale contracts can involve the installation of over 10,000 VSATs. The number of major procurements for VSAT-based networks in any given year is limited and the competition is intense. Losing a modest number of such bids each year could have a significant adverse effect on HNS’ operating results.

HNS’ foreign operations expose it to risks and restrictions not present in its domestic operations.

HNS’ operations outside North America accounted for 31.7% and 31.1% of its revenue for the year ended December 31, 2004 and the nine months ended September 30, 2005, respectively, and HNS’ foreign operations are expected to continue to represent a significant portion of its business. HNS has operations in Brazil, China, Germany, India, Indonesia, Italy, Mexico, the Russian Federation, South Africa, the United Arab Emirates and the United Kingdom, among other nations, and over the last 15 years has sold products in over 100 countries. Foreign operations involve varying degrees of risks and uncertainties inherent in doing business abroad. Such risks include:

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HNS is dependent upon suppliers of components, manufacturing outsourcing, installation and customer service, and its results of operations may be materially affected if any of these third party providers fails to appropriately deliver the contracted goods or services.

HNS is dependent upon the third party products and services provided to it, including the following:

HNS’ failure to develop, obtain or protect its intellectual property rights could adversely affect its future performance and growth.

HNS’ success depends on its ability to develop and protect its proprietary rights to the technologies and inventions used in its products and services, including proprietary VSAT technology and related products and services. HNS relies on a combination of United States and foreign patent, trademark, copyright and trade secret laws as well as licenses, nondisclosure, confidentiality and other contractual restrictions to protect certain aspects of its business. HNS has registered trademarks and patents, and has pending trademark and patent applications in the United States and a number of foreign countries. However, its patent and trademark applications may not be allowed by the applicable governmental authorities to issue as patents or register as trademarks at all, or in a form

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that will be advantageous to HNS. In addition, in some instances HNS may not have registered important patent and trademark rights in these and other countries. In addition, the laws of some countries do not protect and enforce proprietary rights to the same extent as do the laws of the United States. Accordingly, HNS might not be able to protect its proprietary products and technologies against unauthorized third party copying or use, which could negatively affect its competitive position. HNS may fail to recognize opportunities to provide, maintain or enforce intellectual property protection for its business.

Furthermore, HNS’ intellectual property may prove inadequate to protect its proprietary rights, may be misappropriated by others or may diminish in value over time. Competitors may be able to freely make use of HNS’ patented technology after its patents expire or may challenge the validity, enforceability or scope of its patents, trademarks or trade secrets. Competitors also may independently develop products or services that are substantially equivalent or superior to HNS’ technology. It may be possible for third parties to reverse-engineer, otherwise obtain, copy, and use information that HNS regards as proprietary. If HNS is unable to protect its products and services through the enforcement of intellectual property rights, HNS’ ability to compete based on its current market advantages may be harmed. If HNS fails to prevent substantial unauthorized use of its trade secrets, HNS risks the loss of those intellectual property rights and whatever competitive advantage they provide HNS.

Claims that HNS’ products and services infringe upon the intellectual property rights of others could increase its costs and reduce its sales, which would adversely affect its revenue.

HNS has in the past received, and may in the future receive, communications from third parties claiming that it or its products infringe upon the intellectual property rights of others. Litigation may be necessary to determine the validity and scope of third-party rights or to defend against claims of infringement. Litigation may also be necessary to enforce HNS’ intellectual property rights or to defend against claims that HNS’ intellectual property rights are invalid or unenforceable. Such litigation, regardless of the outcome, could result in substantial costs and diversion of resources and could have a material adverse effect on HNS’ business, financial condition and results of operations. It is expected that HNS will be increasingly subject to such claims as the number of products and competitors in its industry grows.

Many entities, including some of HNS’ competitors, have or may in the future obtain patents and other intellectual property rights that cover or affect products or services related to those that HNS currently offers or may offer in the future. In general, if a court determines that one or more of HNS’ services or products infringes on valid and enforceable intellectual property owned by others, HNS may be liable for money damages and may be required to cease developing or marketing those services and products, unless it obtains licenses from the owners of the intellectual property or redesign those services and products in such a way as to avoid infringing the intellectual property rights. If a third party holds intellectual property rights, it may not allow HNS to use its intellectual property at any price, or on terms acceptable to HNS, which could materially adversely affect its competitive position. In addition, HNS’ patents, trademarks and other proprietary rights may be subject to various attacks claiming they are invalid or unenforceable. These attacks might invalidate, render unenforceable or otherwise limit the scope of the protection that HNS’ patents, trademarks and other rights afford. If HNS loses the use of a product or brand name, its efforts spent building that brand may be lost and HNS will have to rebuild a brand for that product, which it may or may not be able to do. Even if HNS prevails in a patent infringement suit, there is no assurance that third parties will not be able to design around its patents, which could harm HNS’ competitive position.

HNS may not be aware of all intellectual property rights that its services or products may potentially infringe. Further, without lengthy litigation, it is often not possible to determine definitively whether a claim of infringement is valid. HNS cannot estimate the extent to which it may be required in the future to obtain intellectual property licenses or the availability and cost of any such licenses. Those costs, and their impact on HNS’ earnings, could be material. Damages in patent infringement cases may also include treble damages in certain circumstances. To the extent that HNS is required to pay royalties to third parties to whom it is not

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currently making payments, these increased costs of doing business could materially adversely affect HNS’ operating results. In addition, under some of its agreements with customers, HNS is not permitted to use all or some of the intellectual property developed for that customer for other customers and in other cases, HNS has agreed not to provide similar services to their competitors. In addition, HNS’ service agreements with its customers generally provide that it will defend and indemnify them for claims against them relating to its alleged infringement of third party intellectual property rights with respect to products and services HNS provides.

If HNS is unable to license technology from third parties on satisfactory terms, its developmental costs could increase and HNS may not be able to deploy its products and services in a timely manner.

HNS depends, in part, on technology that it licenses from third parties on a non-exclusive basis and integrates into its products and service offerings. Licenses for third-party technology that HNS uses in its current products may be terminated or not renewed, and HNS may be unable to license third-party technology necessary for such products in the future. Furthermore, HNS may be unable to renegotiate acceptable third-party license terms to reflect changes in its pricing models. Changes to or the loss of a third-party license could lead to an increase in the costs of licensing or inoperability of products or network services. In addition, technology licensed from third parties may have undetected errors that impair the functionality or prevent the successful integration of HNS’ products or services. As a result of any such changes or loss, HNS may need to incur additional development costs to ensure continued performance of its products or suffer delays until replacement technology, if available, can be obtained and integrated.

If HNS’ products contain defects, it could be subject to significant costs to correct such defects and its product and network service contracts could be delayed or cancelled, which could expose HNS to significant liability and significantly reduce its revenues.

HNS’ products and the networks it deploys are highly complex, and some of them may contain defects when first introduced or when new versions or enhancements are released, despite extensive testing and its quality control procedures. In addition, many of HNS’ product and network services are designed to interface with its customers’ existing networks, each of which has different specifications and utilizes multiple protocol standards. HNS’ products and services must interoperate with the other products and services within its customers’ networks as well as with future products and services that might be added to these networks to meet HNS’ customers’ requirements. The occurrence of any defects, errors or failures in its products or network services could result in incurrence of significant costs to correct such defects, cancellation of orders, a reduction in revenue backlog, product returns, diversion of HNS’ resources, legal actions by its customers or its customers’ end users, including for damages caused by a defective product, the issuance of credits to customers and other losses to HNS or to its customers or end users. If its products and network services do not perform their intended function, customer installations could be delayed or orders for its products and services could be cancelled, which could significantly reduce HNS’ revenues. Any of these occurrences could also result in the loss of or delay in market acceptance of HNS’ products and services and loss of sales, which would harm its reputation, its business and adversely affect its revenues and profitability. In addition, HNS’ insurance would not cover the cost of correcting significant errors, defects, design errors or security problems.

DIRECTV may compete with HNS in certain sectors and subject to certain conditions and, after April 22, 2006, will retain one of HNS’ marketing brand names.

While HNS has entered into a non-competition agreement with DIRECTV, DIRECTV has retained the right to compete with HNS in selling data services to consumers at all times and may compete with it in all areas after the five-year term of the non-competition agreement, which commenced on April 22, 2005. In addition, while the non-competition agreement restricts DIRECTV from using its two SPACEWAY satellites for data service offerings that would directly compete with HNS, DIRECTV is not limited in such use if the video capability of its SPACEWAY satellites are not otherwise capable of commercial operations. Moreover, DIRECTV is not restricted from competing with HNS’ business if such data services are incidental to DIRECTV’s provision of a

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video service to an enterprise customer and are an integral part of such video service or are available as an optional add-on to such video service. In any event, DIRECTV may compete with HNS after the non-competition agreement expires on April 22, 2010.

In addition, the rights to the DIRECWAY ^® brand name and any related trademark rights are being retained by DIRECTV. HNS has agreed to stop using the DIRECWAY ^® brand name and related trademark rights by April 22, 2006. As a result, HNS will need to develop a new brand name for its current VSAT products which will generate additional sales and marketing and general and administrative costs. HNS cannot yet estimate the cost of such efforts, but it may be material and may lead to lessened customer identification for its products. It cannot be determined what effect, if any, that a new brand name will have on HNS’ sales and marketing efforts.

Risks Related to HNS’ Indebtedness

HNS’ high level of indebtedness could adversely affect its ability to raise additional capital to fund its operations and could limit its ability to react to changes in the economy or its industry.

HNS is significantly leveraged and its total indebtedness is approximately $383.2 million as of September 30, 2005. HNS’ substantial degree of leverage could have important consequences for you, including the following:

Covenants in HNS’ debt agreements will restrict HNS’ and our business in many ways.

HNS’ debt agreements contain various covenants that limit HNS’ ability and/or certain of its subsidiaries’ ability to, among other things:

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In addition, HNS’ credit facilities contain restrictive covenants and require it to maintain specified financial ratios and satisfy other financial condition tests. HNS’ ability to meet those financial ratios and tests can be affected by events beyond HNS’ and our control, and no assurance can be given that HNS will meet those tests. A breach of any of these covenants could result in a default under HNS’ credit facilities. Upon the occurrence of an event of default under HNS’ credit facilities, the lenders could elect to declare all amounts outstanding under its credit facilities to be immediately due and payable and terminate all commitments to extend further credit. If HNS were unable to repay those amounts, the lenders under its credit facilities could proceed against the collateral that secures that indebtedness. HNS has pledged a significant portion of its assets as collateral under the credit facilities. In addition, we have pledged all of our membership interests of HNS as collateral under HNS’ credit facilities. If the lenders under HNS’ revolving credit facility accelerate the repayment of borrowings, no assurance can be given that HNS will have sufficient assets to repay its credit facilities and other indebtedness.

We are a holding company and the inability of our subsidiaries to pay distributions or dividends or transfer funds or other assets to us would harm our ability to pay future dividends.

We are a holding company. Our principal assets are membership interests of HNS and cash. Although we do not currently intend to pay dividends on our shares of common stock for the foreseeable future (see “Risks Relating to Our Common Stock Generally—We do not intend to pay dividends on shares of our common stock in the foreseeable future”), in the event that we wished to pay dividends, we would be primarily reliant on distributions or dividends from our subsidiaries to pay such dividends. The ability of HNS to pay us distributions or transfer funds or other assets is subject to the terms of HNS’ debt agreements which contain covenants which, among other things, limit the ability of HNS and certain of its subsidiaries to pay dividends or distributions or redeem or repurchase capital stock. Such limitations could harm our ability to pay future dividends, if any.

Risks Related to the HNS Acquisition

Whether or not the HNS Acquisition is consummated, the announcement and pendency of the HNS Acquisition could cause disruptions in our and HNS’ business, which could have an adverse effect on our and HNS’ business and financial results.

Whether or not the HNS Acquisition is consummated, the announcement and pendency of the HNS Acquisition could cause disruptions in or otherwise negatively impact our and HNS’ business. Specifically:

These disruptions could be exacerbated by a delay in the consummation of the HNS Acquisition or termination of the acquisition agreement and could have an adverse effect on our and HNS’ businesses and financial results if the HNS Acquisition is not consummated or of the combined company if the HNS Acquisition is consummated.

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If we fail to complete the rights offering, we will have substantial debt.

In order to fund the HNS Acquisition, we will borrow $100.0 million from certain of the Apollo Stockholders. See “HNS Acquisition—The Commitment Letter.” Immediately following the distribution, we are conducting the rights offering, as described in “The Rights Offering,” in order to repay the loan from such Apollo Stockholders. If we fail to complete the rights offering, we will have a substantial level of indebtedness to repay under the Promissory Note. Our substantial level of indebtedness could have important consequences to you, including the following:

Risks Related to the Distribution and Separation from SkyTerra

Our historical consolidated and pro forma financial information is not necessarily representative of the results we would have achieved as a stand-alone company and may not be a reliable indicator of our future results.

The historical consolidated and pro forma financial information included herein does not reflect the financial condition, results of operations or cash flows we would have achieved as a stand-alone company during the periods presented or those we will achieve in the future. This is primarily a result of the following factors:

We may incur significant liability to SkyTerra pursuant to the indemnification provisions of the separation agreement.

The separation agreement provides that we will indemnify SkyTerra and its affiliates against potential losses based on, arising out of or resulting from:

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The transitional and separation arrangements with SkyTerra are not the result of arm’s-length negotiations.

We currently have, and after the distribution will continue to have, contractual arrangements which require us to provide transitional services and shared arrangements to SkyTerra and under which we agree to indemnify SkyTerra, and SkyTerra agrees to indemnify us, for specified matters in the context of the separation resulting from the distribution. These agreements were made in the context of a parent-subsidiary relationship and were negotiated in the overall context of the distribution. Accordingly, the terms of these agreements may be less advantageous to, or more burdensome on, us than the terms which would have resulted had the negotiations been arm’s-length.

Risks Relating to Our Common Stock Generally

There may be a limited public market for our common stock, our stock price may experience volatility and our common stock will be quoted on the OTC Bulletin Board, which limits the liquidity and could negatively affect the value of our common stock.

An active trading market for our common stock may not develop as a result of the distribution or be sustained in the future. In addition, the stock market has from time to time experienced extreme price and volume fluctuations that often have been unrelated to the operating performance of particular companies. Changes in earnings estimates by analysts, if any, and economic and other external factors may have a significant effect on the market price of our common stock. Fluctuations or decreases in the trading price of our common stock may adversely affect the liquidity of the trading market for our common stock. Further, price quotations for our common stock will be available on the OTC Bulletin Board following the distribution. Generally, quotation on the OTC Bulletin Board will render our common stock less liquid than stocks listed on national securities exchanges. This lack of liquidity may adversely affect our ability to raise capital through future equity financing.

HNS has a history of losses and may incur losses in the future, which could materially reduce the market price of our stock.

For the three years ended December 31, 2002, 2003 and 2004, HNS has generated net losses of $208.1 million, $157.0 million and $1,433.5 million, respectively. Although HNS achieved profitability in the nine months ended September 30, 2005, HNS may not sustain profitability in future periods. Failure to maintain profitability at HNS may materially impact HNS’ ability to service its indebtedness or fund future growth opportunities and may otherwise reduce the market price of our common stock.

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Fluctuations in our operating results could adversely affect the trading price of our common stock.

Our operating results may fluctuate as a result of a variety of factors, many of which are outside of our control, including:

As a result of these possible fluctuations, period-to-period comparisons of our financial results may not be reliable indicators of future performance.

Future sales of our shares could depress the market price of our common stock.

The market price of our common stock could decline as a result of sales of a large number of shares of our common stock in the market after the distribution or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.

Upon completion of the distribution, · shares of our common stock will be outstanding. In addition, a minimum of · shares, and a maximum of · shares, of our common stock will be issued upon the exercise of rights in the rights offering. By virtue of the registration statement of which this document is a part, all such shares will be freely tradable without restriction under the Securities Act except for any such shares held at any time by any of our “affiliates,” as such term is defined under Rule 144 promulgated under the Securities Act. See “Shares Eligible for Future Sale.” In connection with the distribution, holders of stock options to purchase shares of SkyTerra’s common stock will receive stock options to purchase our common stock under the 2005 Equity and Incentive Plan. See “Director and Executive Compensation—2005 Equity and Incentive Plan.” Upon completion of the distribution, we intend to file one or more registration statements on Form S-8 under the Securities Act to register all of the shares of common stock issued or reserved for issuance under our 2005 Equity and Incentive Plan. Any such Form S-8 registration statement will automatically become effective upon filing. Accordingly, shares of common stock registered under any such registration statement and issued upon exercise of such stock options will be available for sale in the open market, unless such shares of common stock are subject to vesting restrictions.

We may have to issue additional shares of our common stock to satisfy the Class B membership interests of HNS, which upon the one year anniversary of the HNS Acquisition, may be exchanged for our common stock, subject to our Board’s authorization, with the number of shares of our common stock to be issued upon such exchange based upon the fair market value of such vested Class B membership interest divided by the value of our common stock at the time of such exchange. In addition, pursuant to the HNS bonus unit plan and subject to our Board’s authorization, if we complete the HNS Acquisition and a participant in the plan is still employed by HNS on April 22, 2008, then we would exchange vested HNS bonus units for our common stock on that date. If a participant is still employed by HNS on April 22, 2010, then we would exchange the remaining vested HNS bonus units for our common stock on that date. The number of shares of our common stock to be issued upon each such exchange would be based upon the fair market value of such vested bonus unit divided by the value of our common stock at the time of the respective exchange.

We do not intend to pay dividends on shares of our common stock in the foreseeable future.

We currently expect to retain our future earnings, if any, for use in the operation and expansion of our business. We do not anticipate paying any cash dividends on shares of our common stock in the foreseeable future.

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Provisions in our charter documents and Delaware law may delay or prevent our acquisition by a third party.

Our certificate of incorporation and by-laws will contain several provisions that may make it more difficult for a third party to acquire control of us without the approval of our board of directors. These provisions include, among other things, advance notice for raising business or making nominations at meetings of stockholders and “blank check” preferred stock. Blank check preferred stock enables our board of directors, without stockholder approval, to designate and issue additional series of preferred stock with such special dividend, liquidation, conversion, voting or other rights, including the right to issue convertible securities with no limitations on conversion, as our board of directors may determine, including rights to dividends and proceeds in a liquidation that are senior to the common stock. In addition, our board may issue additional shares of common stock without any further vote or action by our common stockholders, which would have the effect of diluting common stockholders. These provisions may make it more difficult or expensive for a third party to acquire a majority of our outstanding voting common stock. In addition, the Delaware General Corporation Law contains provisions that could make it more difficult for a third party to acquire control of our company.

Compliance with changing regulation of corporate governance and public disclosure may result in additional expenses.

Changing laws, regulations and standards relating to corporate governance and public disclosure, including the Sarbanes-Oxley Act of 2002, are creating uncertainty for companies such as ours. We are committed to maintaining high standards of corporate governance and public disclosure. As a result, we intend to invest reasonably necessary resources to comply with evolving standards, and this investment may result in increased general and administrative expenses and a diversion of management time and attention from assisting HNS and our other businesses in revenue-generating activities to compliance activities, which could harm our business prospects.

The Apollo Stockholders will beneficially own a majority of our voting stock.

Following the distribution, the Apollo Stockholders will own an aggregate of 7,044,642 shares, or approximately 68%, of our outstanding common stock. In addition, to the extent that the Apollo Stockholders exercise their over-subscription privileges in accordance with the Commitment Letter, the number and percentage of our shares of outstanding common stock owned by the Apollo Stockholders will be higher. For example, if no other stockholders participate in the rights offering, the Apollo Stockholders will own an aggregate of · shares, or · %, of our outstanding common stock upon the completion of the rights offering. Therefore, the Apollo Stockholders will have control over our management and policies, such as the election of our directors, the appointment of new management and the approval of any other action requiring the approval of our stockholders, including any amendments to our certificate of incorporation and mergers or sales of all or substantially all of our assets. In addition, the level of the Apollo Stockholders’ ownership of our shares of common stock and these rights could have the effect of discouraging or impeding an unsolicited acquisition proposal.

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